Senators Object to Raising Cash from Small Business for Tax Reform

Senior Editor

A group of 46 senators this week sent a letter to the Senate Finance Committee, saying that small businesses shouldn’t be forced to change their accounting methods to raise revenue for broader tax reform.

In an Aug. 6 letter to Committee Chairman Ron Wyden (D., Ore.) and Ranking Member Orrin Hatch (R., Utah), the signatories said they were opposed to a modification that would force some small businesses to use accrual accounting, rather than cash accounting, even though it could raise more than $23 billion in tax revenue over the next decade.

Comments (5 of 6)

A moment of thought would convince anyone but Washington DC types that this measure would reduce the tax take from small business. After a first-year one-time tax revenue boost, tax take would level out--except for one thing. Doing books by accrual takes more accounting expertise and effort for many small companies. So we have to pay more accounting fees. If our costs go up, our net profit goes down, and so do the taxes we pay. Thus the business owners and the nation are worse off, but the CPAs have another government-mandated service to charge for.
I'm sure this argument is incomprehensible to any tax-grubber in WDC.

9:11 am August 12, 2014

scott jeffries wrote:

The quote new "revenue" is more smoke and mirrors DC style. It does NOT produce permanent revenue to the government in most cases. It more of a timing mechanism robbing from future revenue. More like Robin Hood, versus revenue creation. Perhaps if the future your revenue was going to be taxed a different rate, but odds are the future revenue at higher rates would be offset by other the rate or revenue difference.

Rather than play games with their budget numbers, Congress should move for FULL reform of the tax system for both corporations and individuals to a flatter, lower, fairer system. Start with a revenue neutral change plan and then adjust future rates or revenues as needed for Federal Spending.

Trying to raise taxes at the same time creates more winners and losers. Keep tax reform separate from new taxes.

5:37 pm August 11, 2014

Tom Walker wrote:

Only because small businesses are easy targets for the inept Congress

12:15 am August 11, 2014

John Duarte wrote:

I am a small business owner. My estimation of the Camp tax reform as a package is that it facilitates repatriation of overseas corporate money by punishing small busineses with a numer of small mods tht add up to an overall effective increase in taxes.

There are two problems with this. First it taxes main street to the benefit of Wall Street and Easy street. Main street or family owned business are the job creators in our economy. We need our capital to grow and create more jobs. Smaller private businesses don’t off shore jobs or get caught up in bubbles. Shifting a tax burden from large public companies to small business is bad for all US workers.

Second, the need to balance the incentives to get foreign companies to repatriate profits is dependendent on how it is scored by the CBO. If the money is not comming home in the fist place why would the incentive to bring it home need to be scored as a tax expense. Further, how can any group forcast the results of a tax treatment dependant on as many factors and unique situations as the repatriation of foreig profits? Regulatory loads, domestic market potentials, energy costs and social or demographic trends will all weigh in significantly and variably among companies.

Go back to the 1986 tax reform. Keep ACRS, get rid of the ITCs in favor of faster depreciation for longer term assets and kick up the domestic producers credit for domestically HQ’d companies.

10:50 am August 8, 2014

Just another CPA wrote:

It seems to me that this would create a lot of extra work and additional cost on small business, that may generate additional tax the first year it is enacted. Over a period of time the taxable income would level out,
It just a matter of incurring income or expense in either this year or the next.

The amount of taxes collected in the long run would be the same which ever method is used and the small business would have an increase in cost for accounting. What am I missing?

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